Announcement SEL-2025-04 June 04, 2025 B4-1.3-08, Comparable Sales (06/04/2025) Introduction This topic contains information on selection of comparable sales, including: Selection of Comparable Sales Minimum Number of Comparable Sales Age of the Comparable Sales Additional Requirements for New (or Recently Converted) Condos, Subdivisions, or PUDS Rural Properties Use of Foreclosures and Short Sales Uniform Appraisal Dataset (UAD) 3.6 Policy Selection of Comparable Sales The appraiser is responsible for determining which comparables are the best and most appropriate for the assignment. Fannie Mae expects the appraiser to account for all factors that affect value when completing the analysis. Comparable sales should have similar physical and legal characteristics when compared to the subject property. These characteristics include, but are not limited to, site, room count, finished area, style, and condition. External factors, including Federal Emergency Management Agency (FEMA) designated flood zone, should be given consideration when selecting comparables. When choosing comparable sales, the appraiser should examine the market area of the subject property, assess its characteristics, and identify similar comparable sales. Market area is defined as the geographic region, for a subject property, from which most demand comes and in which most of the competition is located. This does not mean comparable sales must be identical to the subject property, but instead should be competitive and appeal to the same market participants that would also consider purchasing the subject property. If the available comparable sales are not similar, the appraiser needs to decide whether an expansion of the market area search is appropriate. If this occurs, the appraiser must provide commentary to explain the rationale for selecting comparable sales outside the subject's market area and make location adjustments if warranted. Comparable sales from within the same market area (including subdivision or project) as the subject property should be used when possible and must be used in certain instances (see below). Sale activity from within the neighborhood is the best indicator of value as sales prices of comparable properties from the same location should reflect the same positive and negative location characteristics. Fannie Mae does allow for the use of comparable sales located in competing market areas, as these may simply be the best comparables available and the most appropriate for the appraiser’s analysis. If this situation arises,

the appraiser must not expand the neighborhood boundaries just to encompass the comparables selected. The appraiser must indicate the comparables are from a competing neighborhood and address any differences that exist. The appraiser must also provide an explanation as to why they used the specific comparable sales in the appraisal report and include a discussion of how a competing neighborhood is comparable to the subject's neighborhood. If a property is located in an area in which there is a shortage of truly comparable sales, either because of the nature of the property improvements or the relatively low number of sales transactions in the neighborhood, the appraiser might need to use properties that are not truly comparable to the subject property. In some situations, properties that are not truly comparable may simply be the best available and the most appropriate for the appraiser’s analysis. The use of such sales is acceptable if the appraiser adequately documents the analysis and explains why they were used. (For additional information, see B4-1.3-03, Neighborhood Section of the Appraisal Report. When describing the proximity of the comparable sale to the subject property, the appraiser must be specific with respect to the distance in terms of miles and include the applicable directional indicator (for example, “1.75 miles NW”). The distance between the subject property and each comparable property is to be measured using a straight line between the properties. Minimum Number of Comparable Sales A minimum of three closed comparables must be reported in the sales comparison approach. Additional comparable sales may be reported to support the opinion of market value provided by the appraiser. The subject property can be used as a fourth comparable sale or as supporting data if it was previously closed. Contract offerings and current listings can be used as supporting data, if appropriate. See Additional Requirements for New (or Recently Converted) Condos, Subdivisions, or PUDs below for exceptions to this policy. In no instance may the appraiser create comparable sales by combining vacant land sales with the contract purchase price of a home (improvements only). While these transactions cannot be used to meet the required minimum three closed comparables, these transactions, which are often completed as part of a construction-to- permanent loan transaction, may be included as additional support with appropriate commentary. Age of the Comparable Sales Comparable sales that have closed within the last 12 months should be used in the